RH (NYSE: RH) To Our People, Partners, and Shareholders,
I hope this note finds you and your family healthy and safe.
These are clearly unimaginable times. Never have we been faced
with such a crisis that crosses communities, cultures and countries
around the world. The COVID-19 coronavirus is impacting every
aspect of life as we know it, and navigating through this from a
personal and professional perspective is requiring us to make
unprecedented changes.
As you are aware, we are entering the fourth week that our
Galleries, Restaurants, and Outlets in North America have been
closed to help prevent the spread of COVID-19. It appeared hopeful
that business would resume soon when President Trump discussed as
late as Friday March 27th that he anticipated the country could be
back to work and reopen by Easter weekend April 12th, only to
follow up two days later on Sunday March 29th that he now expects
businesses to remain closed through the end of April. That is how
quickly this situation is changing, not even the President is able
to predict what to expect day to day, or in some cases hour to
hour. While hopeful we can get back to our normal lives earlier
than later, what remains paramount is the safety and well-being of
our people, customers, and communities.
With the lack of clarity regarding when it will be safe to
reopen, we have made the difficult decision to temporarily furlough
approximately 2,300 team members, and permanently reduce our
workforce by 440 team members. A furlough anticipates that team
members will return to work at some point in the future. The exact
timing of when our Galleries, Restaurants, and Outlets will reopen
is uncertain. While we expect some portion of our business may
resume on the basis of what state and local governments permit, the
complete return to normal operations may occur over time rather
than all at once.
Additionally, we are implementing temporary salary reductions
for leaders across the Company ranging from 10% for Leaders and
salaried Team Members, 20% for Directors, 30% for Vice Presidents,
and 40% for Senior Vice Presidents and Chief titles. The Executive
Leadership Team has chosen to forgo 100% of our salaries until
business stabilizes.
To support our team members who are impacted by these decisions,
we have provided information regarding unemployment benefits and
the government sponsored assistance programs under the CARES Act in
the United States, and the CERB in Canada. We will also continue to
provide health benefits, including covering team member
contributions during the furlough period.
We have also made decisions to significantly reduce capital
expenditures and expenses by approximately $130 million and $150
million in fiscal 2020. The capital expenditure reductions are
primarily the result of delaying our Gallery transformation efforts
with the exception of RH Marin and RH Charlotte, which will open
sometime this Spring-Summer when state and local governments
permit. The $150 million of expense reductions are inclusive of
approximately $70 million of compensation savings, assuming our
Galleries, Restaurants, and Outlets reopen in June, $50 million of
advertising savings, and $20 million of savings related to the
delay of our Gallery transformations.
While the doors to our Galleries are closed, our interior design
teams across North America continue to open their minds, and are
finding creative ways to help our customers reimagine their homes
while sheltering in their home. We also believe the seismic shifts
in consumer spending that are beginning to take hold, and the new
habits being formed as a result of social distancing and sheltering
in place, create opportunities for the RH brand to play an even
more important role in the lives of consumers who are making their
homes the center of everything they do.
We would like to once again thank all of the brave individuals
across health care, social services, sanitation, transportation,
warehousing, delivery, law enforcement, pharmacy, grocery and
government who continue to risk their health to protect ours, and
keep some semblance of familiarity in our lives, in a very
unfamiliar world.
Lastly, rest assured we will be doing everything in our power to
overcome this crisis and bring our team members back together so we
can continue our quest of becoming one of the most admired brands
in the world.
We will use this period to once again reimagine and elevate the
RH brand, ensuring this time is defined by our vision, not by a
virus.
Carpe Diem,
Gary ABOUT RH
RH (NYSE: RH) is a curator of design, taste and style in the
luxury lifestyle market. The Company offers its collections through
its retail galleries across North America, the Company’s multiple
Source Books, and online at RH.com, RHModern.com,
RHBabyandChild.com, RHTeen.com and Waterworks.com.
FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements within the
meaning of the federal securities laws, including without
limitation, statements regarding the planned reductions in expenses
and capital expenditures in fiscal 2020 including the amount of
such savings and the breakdown of such savings by category;
expectations regarding the delay in our Gallery transformation
efforts and the potential timing for opening the RH Marin and RH
Charlotte Galleries in 2020; expectations that our interior design
teams are finding creative ways to engage our customers while our
Galleries are closed; expectations concerning new consumer spending
patterns and habits that are being formed as a result of social
distancing and sheltering in place including that consumers are
making their homes the center of their lives; our belief that we
are well-positioned to take advantage of opportunities as a result
of the COVID-19 crisis; our anticipation that we will be providing
additional information about our outlook and expectations at some
point in the future when business conditions begin to normalize;
expectations regarding the furlough of our team members including
the continuation of health benefits to furloughed associates and
the timing of their potential return to work; the timing for the
reopening of our Galleries, Restaurants and Outlets; the duration
and scope of salary reductions for leaders across the Company;
expectations about our ability to reimagine and elevate the RH
brand; our quest to become one of the most admired brands in the
world; and any statements or assumptions underlying any of the
foregoing.
You can identify forward-looking statements by the fact that
they do not relate strictly to historical or current facts. These
statements may include words such as “anticipate,” “estimate,”
“expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,”
“should,” “likely” and other words and terms of similar meaning in
connection with any discussion of the timing or nature of future
events. We cannot assure you that future developments affecting us
will be those that we have anticipated. Important risks and
uncertainties that could cause actual results to differ materially
from our expectations include the global outbreak of the
coronavirus (COVID-19) virus, which poses significant and
widespread risks to our business as well as to the business
environment and the markets in which we operate our business. We
have already experienced significant disruption to our business as
a result of the rapid development of the COVID-19 pandemic. The
Company has temporarily closed its retail locations for an
indeterminate period of time and has implemented other efforts to
reduce expenses including through the furlough and termination of a
large number of our team members. The impact of these efforts is
uncertain and we may not achieve the benefits that we seek from
these initiatives. Changes in consumer behavior and health concerns
as a result of the COVID-19 outbreak have had a negative effect on
customer demand. A large number of states and municipalities in the
U.S. where we operate have implemented temporary closure
requirements with respect to non-essential business operations and
the duration of these requirements are unknown, and a number of
mall operators as well as other retailers have elected to
temporarily cease operations. The COVID-19 outbreak also may have a
material adverse impact on our supply chain including the
manufacture, supply, distribution, transportation and delivery of
our products. The magnitude and duration of the negative impact to
our business from the COVID-19 pandemic cannot be predicted with
certainty, but the Company believes COVID-19 is likely to result in
an adverse impact on our business, results of operations and
financial condition, particularly if ongoing mitigation actions
occur for a significant amount of time. Other important risks and
uncertainties that could cause actual results to differ materially
from our expectations include, among others, risks related to our
dependence on key personnel and any changes in our ability to
retain key personnel; successful implementation of our growth
strategy; risks related to the number of new business initiatives
we are undertaking; successful implementation of our growth
strategy including our real estate transformation and the number of
new Gallery locations that we seek to open and the timing of
openings; uncertainties in the current performance of our business
including a range of risks related to our operations as well as
external economic factors; general economic conditions and the
housing market as well as the impact of economic conditions on
consumer confidence and spending; changes in customer demand for
our products; our ability to anticipate consumer preferences and
buying trends, and maintaining our brand promise to customers;
decisions concerning the allocation of capital; factors affecting
our outstanding convertible senior notes or other forms of our
indebtedness; our ability to anticipate consumer preferences and
buying trends, and maintain our brand promise to customers; changes
in consumer spending based on weather and other conditions beyond
our control; strikes and work stoppages affecting port workers and
other industries involved in the transportation of our products;
our ability to obtain our products in a timely fashion or in the
quantities required; our ability to employ reasonable and
appropriate security measures to protect personal information that
we collect; our ability to support our growth with appropriate
information technology systems; risks related to our sourcing and
supply chain including our dependence on imported products produced
by foreign manufacturers and risks related to importation of such
products including risks related to tariffs and other similar
issues, as well as those risks and uncertainties disclosed under
the sections entitled “Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in
RH’s most recent Form 10-K filed with the Securities and Exchange
Commission, and similar disclosures in subsequent reports filed
with the SEC, which are available on our investor relations website
at ir.rh.com and on the SEC website at www.sec.gov. Any
forward-looking statement made by us in this press release speaks
only as of the date on which we make it. We undertake no obligation
to publicly update any forward-looking statement, whether as a
result of new information, future developments or otherwise, except
as may be required by any applicable securities laws.
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version on businesswire.com: https://www.businesswire.com/news/home/20200406005395/en/
PRESS Chelsea Allen, callen@RH.com
INVESTOR RELATIONS Allison Malkin, (203) 682-8225,
allison.malkin@icrinc.com
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